Deepi Rupindersingh Arora v. ACIT-19(1), Mumbai
[Citation -2016-LL-1007-151]

Citation 2016-LL-1007-151
Appellant Name Deepi Rupindersingh Arora
Respondent Name ACIT-19(1), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 07/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags income from house property • unabsorbed depreciation • plant and machinery • mala fide intention • penalty proceeding • bona fide mistake • original return • capital gain • wrong claim
Bot Summary: Per contra, Ld. Counsel of the assessee submitted that in this case facts and chronology of case reveals that there was bona fide mistake on the part of the assessee. The conduct of the assessee would show that the claim was made inadvertently by the assessee on account of inadvertent mistake made by the accountant namely Mr. Surendra Gupta. The assessee while going through its papers realised her mistake and therefore, voluntary, at her own motion and without having been pointed out any mistake by the AO, corrected her bona fide mistake by filing a revised computation of income before the AO. He further submitted that assessee had no guilty mind. In the case before us, the only explanation given by the assessee is that it is a case of bonafide mistake on the part of assessee and her staff. Now, the law in this regard has been well settled after the judgment of Hon ble Supreme court in the case of Price Waterhouse Coopers Pvt. Ltd.(supra) wherein it has been held by the their lordships that in case a bonafide and inadvertent error is made by the assessee while submitting its return, which could 6 Deepi R. Arora be described at human error, then it cannot be said that assessee was guilty of either furnishing of inaccurate particulars or had attempt to conceal its income and therefore penalty should not be levied under such cases. In the said return, assessee made claim of set off of unabsorbed depreciation amounting to Rs.75,07,162/- and also gave year-wise breakup of unabsorbed depreciation available to the assessee by way of a table on the bottom of 7 Deepi R. Arora computation sheet. Now, under these circumstances, the case of the lower authorities is that it was a deliberate attempt on the part of the assessee to make an excessive claim and in case scrutiny proceedings would not have taken place, then assessee would have gone scot-free.


IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI Before Shri Sanjay Garg, Judicial Member, and Shri Ashwani Taneja, Accountant Member ITA NO.1073/Mum/2015 Assessment Year: 2008-09 Deepi Rupindersingh Arora, ACIT 19(1) 16, Golf Link, Arora House, Union Park, Khar (E), Mumbai Vs. Mumbai-400052 (Appellant) (Revenue) P.A. No. AAIPA1690A Appellant by Shri H.P. Mahajani, & Shri Karthik Natarajan, (AR) Revenue by Shri B.S. Bist (Sr. DR) Date of Hearing : 03/10/2016 Date of Order: 07/10/2016 ORDER Per Ashwani Taneja (Accountant Member): This appeal has been filed by Assessee against order of Ld. Commissioner of Income Tax (Appeals), Mumbai- 34,{(in short CIT(A) }, dated 18.01.2015 passed against penalty order of AO dated 28.03.2014 u/s 271(1)(c) for Assessment Year 2008-09 on following grounds: 2 Deepi R. Arora On facts and circumstances of case and in law: 1. leaned CIT(A) erred in confirming penalty u/s. 271(1)(c) of Rs. 35,00,000/- in respect to inadvertent claim of set off of unabsorbed depreciation of Rs.75,07,162/- although same was voluntarily rectified by filing Revised Computation during assessment proceedings. learned AO failed to take into consideration that inadvertent mistake while filing return was on account of Accountant, Mr. Surendra Gupta and Chartered Accountant, Mr. Snehal Uttarwar and that Appellant had subsequently, voluntarily detected, mistake and same was submitted bef ore assessment was completed and bef ore AO raised any notice or objection of erroneous claim. 3.Without prejudice learned CIT(A) erred in levying higher penalty of Rs. 35,00,000/-(being 135% approximately), instead of minimum of Rs.25,52,435/- (being 100% minimum penalty), without substantiating any reasons for such higher penalty. 2. During course of hearing, arguments were made by Shri H.P. Mahajani, & Shri Karthik Natarajan, Authorised Representative (AR) on behalf of Assessee and by Shri B.S. Bist, Departmental Representative (DR) on behalf of Revenue. 3. only issue arising in this appeal is whether levy of penalty u/s 271(1)(c) on incorrect claim of set off of unabsorbed depreciation of Rs.75,07,162/- is justified under law in given facts of this case. case of AO is that claim of set off of unabsorbed depreciation is patently erroneous and incorrect and thus, liable for penalty. On other hand, case of assessee is that claim is though admittedly incorrect but that was made inadvertently, unknowingly and without any mala fide intention and that it was corrected immediately and voluntarily by filing of 3 Deepi R. Arora revised return as soon as it came to knowledge of assessee and therefore case of assessee is not fit for levy of penalty, and therefore, penalty levied by AO should be deleted. 3.1. Both parties have made their respective arguments before us. Ld. DR has supported stand of AO as well as Ld. CIT(A) in holding that claim of assessee being totally incorrect makes her liable for levy of penalty. It was also submitted that assessee had filed revised return only because assessee was cornered and in absence of scrutiny of return of assessee, claim would have escaped attention and therefore, assessee would have escaped with under assessment of tax. He placed reliance on judgment of coordinate bench in case of Smt. Pratima B. Shah (in ITA No.3428/Mum/2014 dated 28th July 2016) wherein penalty was confirmed where apparently incorrect claim was made by assessee, though same was corrected by filing revised return. 3.2. Per contra, Ld. Counsel of assessee submitted that in this case facts and chronology of case reveals that there was bona fide mistake on part of assessee. conduct of assessee would show that claim was made inadvertently by assessee on account of inadvertent mistake made by accountant namely Mr. Surendra Gupta. It was submitted that admittedly in this case claim made was incorrect on face of it and it is also true that scrutiny proceedings were initiated by AO before assessee could file revised return. But, it is also true that no query was asked 4 Deepi R. Arora with regard to any claim of depreciation on plant and machinery by AO during course of assessment proceedings, as is evident from notices, questionnaires issued by AO, copies of which have been annexed in paper book. assessee while going through its papers realised her mistake and therefore, voluntary, at her own motion and without having been pointed out any mistake by AO, corrected her bona fide mistake by filing revised computation of income before AO. He further submitted that assessee had no guilty mind. claim with regard to set off of depreciation was made on basis of information which was already held on record of AO in return of this year as well as records of earlier years. concept of human probability suggests that assessee would not make incorrect claim based upon information which is already available on record and no sane person would take such risk to invite burden of tax, interest, penalty and prosecution. Thus, all facts and circumstances of case suggest that it is apparently case of bonafide mistake or human error on part of staff of assessee. In his defense, he strongly relied upon judgment of Hon ble Supreme Court in case of Price Waterhouse Coopers Pvt. Ltd. v. CIT 348 ITR 306 (SC). 3.3. We have gone through orders passed by lower authorities and submissions made by both sides as well as judgments relied upon before us. Before we analyse facts of this case, we shall first briefly discuss legal position with regard to levy of penalty under such cases. It is well settled 5 Deepi R. Arora law that penalty proceeding are independent of assessment proceedings. parameters for determining tax liability and for levying penalty are quite different from each other under law. Thus, as natural corollary, it can be said that making of addition/disallowance by AO should not automatically lead to levy of penalty also by AO. For purpose of levy of penalty, there must be concealment or furnishing of inaccurate particulars of income by assessee, as envisaged u/s 271(1)(c). reading of section 271(1)(c) makes it further clear that if assessee offers explanation and substantiates that such explanation is bonafide and that all facts relating to same and material to computation of his total income had been disclosed by him, then amount of addition or disallowance made by AO shall not be deemed to represent income in respect of which particulars have been concealed. 3.4. In case before us, only explanation given by assessee is that it is case of bonafide mistake on part of assessee and her staff. Thus, for purpose of finding out and determining whether assessee offered explanation and whether said explanation can be held to be bonafide so as to meet parameters of section 271(1)(c), same has to be tested on anvil of facts of each case. Now, law in this regard has been well settled after judgment of Hon ble Supreme court in case of Price Waterhouse Coopers Pvt. Ltd.(supra) wherein it has been held by their lordships that in case bonafide and inadvertent error is made by assessee while submitting its return, which could 6 Deepi R. Arora be described at human error, then it cannot be said that assessee was guilty of either furnishing of inaccurate particulars or had attempt to conceal its income and therefore penalty should not be levied under such cases. Thus, what is to be seen under such cases is that whether case of assessee would fall into category of bonafide mistake , or inadvertent or genuine human error , and if yes then assessee s case would fall outside net of penal provisions contained in section 271(1)(c). 3.5. Thus, what emerges from legal position as discussed above is that merely because claim made by assessee on account of set off of unabsorbed depreciation was rejected by AO, it would not automatically lead to levy of penalty. next step before levy of penalty would be examining explanation given by assessee, if any. Since in this case assessee has given explanation of there being bonafide mistake having been committed on part of assessee, therefore, only issue to be decided in this case is whether incorrect claim made by assessee was on account of bonafide mistake or inadvertent or genuine human error or not. For this purpose, we have analysed facts of this case. With assistance of representatives of both parties, it is noticed by us that assessee filed its original return within time as stipulated u/s 139(1) on 29.09.2008. In said return, assessee made claim of set off of unabsorbed depreciation amounting to Rs.75,07,162/- and also gave year-wise breakup of unabsorbed depreciation available to assessee by way of table on bottom of 7 Deepi R. Arora computation sheet. Subsequently, notice was issued u/s 143(2) of Act, dated 06.08.2009 wherein no queries were asked by AO. adjournment was taken by assessee vide letter dated 20th August, 2009. Thereafter another notice was issued by AO dated 13th July 2010 wherein detailed questionnaire was issued by AO. perusal of detailed questionnaire reveals that no question has been raised by AO with respect to issue of depreciation on plant and machinery or anything related to set off of unabsorbed depreciation. Subsequently, before any other query was raised by AO, assessee voluntarily filed revised return on 26.07.2010 and withdrew incorrect claim of set off of unabsorbed depreciation and also paid tax arising thereon, on voluntary basis. Now, under these circumstances, case of lower authorities is that it was deliberate attempt on part of assessee to make excessive claim and in case scrutiny proceedings would not have taken place, then assessee would have gone scot-free. Whereas assessee says it was purely case of bonafide mistake and that s why it has been corrected voluntary without having been pointed out by AO. Under these circumstances, we have to decide and judge whose version is correct. In this regard, we find from documents shown to us that actually claim of amount of unabsorbed depreciation had been exhausted in immediately preceding year i.e. A.Y. 2007-08, as is evident from assessment order of A.Y. 2007-08, passed u/s 143(3) dated 29.12.2009. Thus, claim on account of unabsorbed depreciation was earlier available, but same was 8 Deepi R. Arora exhausted in immediately preceding year. It is further noted that in computation sheet filed along with return of A.Y. 2007-08 also, assessee had given similar table at bottom of computation sheet shown year-wise breakup of availability of unabsorbed depreciation wherein entire claim has been set off and exhausted in A.Y. 2007-08 itself. Assessee has contended that while preparing computation sheet of impugned year, this very table (as given in computation sheet of AY 2007-08) was inadvertently copied and pasted in computation sheet of impugned assessment year. 3.6. We have carefully analysed and find some force in contention of assessee. It is noted that pattern and frame work of computation sheets filed along with returns for A.Y. 2007-08 and A.Y. 2008-09 are identical. It seems to be quite possible that while preparing computation sheet of 2008- 09, accountant had picked up, copied and pasted Proforma of computation sheet of A.Y. 2007-08. During this process, table containing year-wise breakup of unabsorbed depreciation has been copied and pasted as it is. We can say it so also for reason that there seems to be substance in explanation of assessee that assessee shall not make misadventure of this type where entire information is already available on record of AO in current year s return and easily cross verifiable with past years returns and other records. No taxpayer much less lady taxpayer would intentionally do misadventures of such nature and magnitude, which may in turn invite unnecessary litigation involving 9 Deepi R. Arora taxes, interest, penalties and prosecution. Apart from that it is noted by us that in case before us assessee had voluntarily corrected its claim that too without being pointed out by AO, as discussed in detail in earlier part of our order. Further, assessee had submitted detailed affidavits from Mr. Surendra Gupta (Accountant of assessee) and Mr. Snehal Uttarwar, Chartered Accountant (Consultant of assessee). Both of affidavits are duly sworn on oath. In these affidavits, facts have been deposed on oath and averments have been made. Relevant portion of affidavit of Mr. Surendra Gupta is reproduced and discussed hereunder for sake of ready reverence: ..4. assessee had at time of filing its original return on my advise, erroneously claimed deduction of Rs.75,07,162/- as unabsorbed depreciation. advise given by me was on account of inadvertent mistake as I was under bonafide belief that unabsorbed depreciation of Rs.75,07,162/- was not claimed by assessee earlier and therefore was eligible for set off in A.Y. 2008-09. Thus, it is at my instance assessee made erroneous claim of set off of Rs.75,07,162/-. assessee is not aware of provisions of Income tax and therefore is dependent on my advise. Once Return of income is prepared, she only signs it. 5. However subsequently, case was picked up for scrutiny, and while I was studying facts of case, I noticed that I had made assessee made wrong claim of set off of unabsorbed depreciation and therefore I advised Assessee to immediately file Revised Return. Therefore, assessee voluntarily filed Revise Return during course of assessment proceedings u/s 143(3), thereby withdrawing claim of set off .. 10 Deepi R. Arora 3.7. Similarly, affidavit filed by Mr. Snehal Uttarwar (CA) also contained detailed averments. relevant portion of affidavit is discussed hereunder: I, MR. Snehal Uttarwar aged 53 years, having address At A/402 Chembur Heights, Sindhi Society, Chembur, Mumbai -400071 hereby solemnly affirm and declare as under: 1. I was appointed by Smt. Deepi Rupindersingh Arora (hereinafter referred to as Assessee'), as Consultant for AY 2008 - 2009. entire accounts writing and tax return filing work was done by Accountant appointed by Assessee. 2. My scope of work included over-seeing final computation of Income made Accountant. 3. Assessee is assessed to income-tax under P.A.No. AAIPA1690A. During AY 2008-09, Assessee derived income from House Property, Business/ Profession, Capital Gain and Other Sources. 4. For Asst. Year 2008-09, accountant finalized her books of accounts and computed taxable income at Rs. 60,06,890/- and accordingly made Assessee file her Return of income on 29-09-2008. Original Return of Income was filed after claiming set off of 'Carry Forward Depreciation' of Rs. 75,07,162/-. 5. Assessee had at time of filing its original Return on accountants advise, erroneously claimed deduction of Rs.75,07,162/- unabsorbed depreciation. 6. Assessee obviously is not aware of provisions of Income-tax and therefore is dependent on preparation of Return by Accountant and my over-seeing function. Once Return of income is prepared Accountant and overseen by me, she only signs it. 7. Subsequently, case was picked up for scrutiny, and while Accountant was studying facts of case, he noticed excess claim of said unabsorbed depreciation and brought same also in my notice and accordingly immediately I advised Assessee to file revised return during course of assessment proceedings. 11 Deepi R. Arora 8. As such, initial excess claim has resulted on account of inadvertent mistake on part of Accountant as well as on my overseeing, part same was rectified by filing reused return. There was no bonafide contention neither of me as consultant nor of assessee to claim excess unabsorbed depreciation. 9. Since Assessee has voluntarily submitted Revised Return (to rectify inadvertent mistake in Original Return) before assessment was completed, Revised Return cannot said to be invalid. 10. learned AO failed to take into consideration that on perusal of Notice u/s. 142(1) dated 13-07-2010 along with a questionnaire asking for various details, there was neither any question nor any clarification was sought in respect to claim of set off of brought forward unabsorbed depreciation. Assessee has voluntarily revised its return of income when inadvertent mistake came to her knowledge. 11. It is for reasons abovementioned that I humbly request before your Honor that Assessee should not suffer due to any inadvertence caused by Accountant and bona fide lapse which is already rectified by filing revised return. 3.8. From combined reading of above said affidavits, it is clear that claim was made without any personal knowledge or involvement of assessee. There is uniformity in averments made by both above said persons. It has been further noted by us that none of lower authorities have deemed it necessary to cross examine either of these persons and without their cross examination lower authorities have chosen to disbelieve averments made on oath by these persons. In our view, approach followed by lower authorities is neither fair nor justified. penal provisions are quite harsh in nature, in as much as, confirmation of 12 Deepi R. Arora penalty may lead to prosecution of assessee. Therefore, revenue officials are expected to observe due diligence in discharge of their legal obligations while levying or confirming penalty. assessee should be given full of opportunity before levy of penalty and all facts and circumstances of case must be collectively analysed before levying penalty. penalty should never be levied in casual or light hearted manner. levy of penalty should be based solely upon material held on record and keeping in view objective parameters. It appears that approach to lower authorities in this case has been that since incorrect claim has been made, then penalty must be levied irrespective of fact whether incorrect claim was as result of bonafide mistake or genuine human error or otherwise. Thus, we find that penalty in this case has been wrongly levied and therefore, same is directed to be deleted. 3.9. Before parting with, we shall like to briefly mention that it is true that there cannot be any straight jacket formula to decide whether mistake in return was bonafide or otherwise. But, it is expected from income tax authorities to make fair assessment of income and tax, interest or penalties leviable thereupon. Such cases, as is before us, may involve certain degree of subjectivity. But that can be avoided very well if objective parameters are kept into account, and that world be possible if case of assessee is decided with open mind and without any pre-conceived notion and after taking into account all facts and circumstances of case, on case to case basis. If such approach is followed, 13 Deepi R. Arora actions of lower authorities would be significantly closer to law and facts, and in that manner faith of taxpayers will also further increase. 3.10. In view of above said discussion, penalty levied @ 135% (computed on amount of tax ought to be evaded) amounting to Rs.35 lakhs is directed to be deleted and thus, grounds filed by assessee are allowed. 4. In result, appeal of Assessee is allowed. Order pronounced in open court on 7th October, 2016 (Sanjay Garg ) (Ashwani Taneja) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 07/10/2016 Patel, P.S Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. ( ) CIT, Mumbai. 4. CIT(A)- , Mumbai 5 DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy. Asstt. Registrar) ITAT, Mumbai 14 Deepi R. Arora Date Initial Original order dictated directly on computer 1. Draft dictated on 3.10.16 Sr.PS 4.10.16 2. Draft placed before author Sr.PS 3. Draft proposed & placed before JM/AM second member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to Sr.PS Sr.PS/PS 6. Date of pronouncement Sr.PS 7. File sent to Bench Clerk Sr.PS 8. Date on which file goes to Head Clerk 9. Date of dispatch of Order Deepi Rupindersingh Arora v. ACIT-19(1), Mumbai
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